Stock narratives bifurcate around inflation panic

Monday 24 May 2021

Revisiting our weekly assessment of Wall St factor analysis we find BofA still occupying the good news is bad news narrative:

The taper barbell:long inflation & long quality; long inflation = long commodities,short bonds & long commodity currencies, small cap, EAFE/EM cyclicals; long quality = long low-beta utilities, staples, and short “long-duration”equities.

Long inflation: case for inflation causing jump in inflation expectations; asset price inflation now mutating into real estate, commodities; next leg of trade…a. acceleration in wages (AHE YoY >3.5% in coming months), b. new highs in oil price, c.further breakdown in long duration stocks e.g.XBI <$130, TAN<$80, ARKK <$110, KWEB<$70.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.